FacebookTwitterGoogle+RedditEmail

Why They Call It Fall

by DAVE LINDORFF

So now it turns out that the whole Troubled Assets Relief Program (TARP) was a flop or more likely a scam. Remember Bush Treasury Secretary Henry Paulson telling us last September that credit markets had locked up, and then, after half of the $750 billion that he extorted out of Congress was handed out to Wall Street firms, new President Barack Obama justifying the spending of the second half of the money because we needed to “get the banks lending again”?

Well, now Neil Barofsky, the special inspector general for TARP, is telling us that all that money, and another more than $2 trillion in loans, accomplished nothing.  In an interview with Lagan Sebert, published in Huffington Post, Barofsky says, “We were told by Treasury that the purpose of the TARP fund was to increase lending. But we haven’t increased lending.”

Well yeah, that’s true. Just ask any ordinary working stiff. My little bank, the Harleysville National Bank here in eastern Pennsylvania, far from expanding lending, has been shutting down customer credit lines. As a bank manager told me, they were “reviewing all our equity lines” in light of declining property values (actually, property values in our area north of Philadelphia have remained pretty stable).  In general, banks across the country have been canceling credit lines, closing credit card accounts on customers deemed risky—including small businesses—and making it very hard to get a new mortgage. (They’ve also been raising all kinds of fees, ripping customers off in other ways, but that’s another story.)

And that goes for the biggest banks that got billions of dollars in taxpayer bailout funds.

Barofsky has been trying doggedly to find out whatever happened to all that money of ours that was shoveled out to the banks, and as he reports, he’s been working not just without any help from the Treasury Department, but actually against the active resistance of Treasury, which he accuses of having tried to dissuade him from even looking into it.

“My biggest surprise,” he says, “is when we announced an audit (of TARP), Treasury went out of their way to say…it would be a big waste of time.” He says Treasury officials including Treasury Secretary Tim Geithner, claimed that it would be impossible to find out where the money went, on the argument that money is “fungible”—that is to say all money is the same.  Of course this is a cynical and ridiculous assertion. If it were true, there would be no job for auditors, since all auditors do is look to find out where money went. (Imagine telling an IRS auditor that it is a waste of time auditing your books, because money is fungible!)

In any event, Barofsky has gone about his work, with or without the backing of the Obama Treasury Department, and what he found is that instead of lending out the money that they were provided with by taxpayers, the banks have been “acquiring other institutions, sitting on it, paying down credit lines,” and, of course, paying out obscene bonuses to executives.

The one thing the banks are not doing is lending.

But then, as I wrote last February, it was silly to think that by shoveling money into banks during a record recession, the banks would then lend it out.  First of all, there was the awkward reality that good companies were and still are not looking to borrow money. Rather, they are trying to pay down debt and get their balance sheets on more solid ground to survive a period of low or declining sales and earnings.  The only companies that would be trying to borrow right now would be the ones that were on the rocks, and wanted money just to stay afloat. And what banker would lend to them? And second, if the banks could make more money by investing their new cash instead of making risky loans with it, why would they lend? So most of them just used the money to invest in Treasury Bonds.

The long and the short of it is that we’ve been taken for a very big and costly ride by banks that created a huge crisis and that then got the government to bail them out of it with our money, and by two administrations, one Republican and now one Democratic, that have been submissive and willing servants of the big banks.

The big surprise to me has been Paul Volcker, who I mistakenly took to be an over-the-hill relic and Wall Street patsy.  The former Carter and Reagan-era Federal Reserve Board chairman, currently chair of President Obama’s economic advisory panel, is publicly warning that the president’s bank policies are preserving a system of giant banks that are “too big to fail,” and are risking further, even larger bailouts.

Barofsky agrees, saying that since the bailout, under Obama’s bank policies, big banks already deemed “too big to fail” have become even bigger, and he concludes, “We may be in a far more dangerous place today than we were in a year ago,” for having told certain financial companies that we will not let them fail.

Little wonder that the smart money—that would be the insiders in corporate boardrooms and executive suites—is reportedly selling shares as fast as they can be sold, with the experts reporting that insider sales of company stock are running 31:1 on the sell side. The explanation: with layoffs still running at over 500,000 a month, and nobody hiring, these executives don’t see anything in the year ahead or even longer that is likely to put the economy on a renewed growth path.

Putting these bits of news together doesn’t paint a pretty picture: We’ve got an economy that appears headed for at best a long period of stagnation and, more likely, for a second downturn, once the effect of last March’s stimulus package wears off. We’ve got a financial system that has been propped up artificially, its balance sheets soggy with underwater mortgages and worthless derivatives, and its executives holding assurances that they can count on the government bailing them out no matter what stupid or self-serving decisions they make. We’ve got an economy that is 70% based upon consumer spending, in which one in five people is unemployed or involuntarily underemployed. We’ve got a nation that hardly makes anything, at the same time that its currency is sinking like a stone, making imports increasingly expensive, And we have a stock market that has been inflated into a giant bubble, just waiting to pop.

October should be an interesting month this year.

DAVE LINDORFF is a Philadelphia-area journalist. His latest book is “The Case for Impeachment” (St. Martin’s Press, 2006). His work is available at www.thiscantbehappening.net

 

 

 

 

Dave Lindorff is a founding member of ThisCantBeHappening!, an online newspaper collective, and is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press).

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

Weekend Edition
December 09, 2016
Friday - Sunday
Jeffrey St. Clair
Roaming Charges: Nasty As They Wanna Be
Henry Giroux
Trump’s Second Gilded Age: Overcoming the Rule of Billionaires and Militarists
Andrew Levine
Trump’s Chumps: Victims of the Old Bait and Switch
Chris Welzenbach
The Forgotten Sneak Attack
Lewis Lapham
Hostile Takeover
Joshua Frank
This Week at CounterPunch: More Hollow Smears and Baseless Accusations
Paul Street
The Democrats Do Their Job, Again
Vijay Prashad
The Cuban Revolution: Defying Imperialism From Its Backyard
Michael Hudson - Sharmini Peries
Orwellian Economics
Erin McCarley
American Nazis and the Fight for US History
Mark Ames
The Anonymous Blacklist Promoted by the Washington Post Has Apparent Ties to Ukrainian Fascism and CIA Spying
Yoav Litvin
Resist or Conform: Lessons in Fortitude and Weakness From the Israeli Left
Conn Hallinan
India & Pakistan: the Unthinkable
Andrew Smolski
Third Coast Pillory: Nativism on the Left – A Realer Smith
Joshua Sperber
Trump in the Age of Identity Politics
Brandy Baker
Jill Stein Sees Russia From Her House
Katheryne Schulz
Report from Santiago de Cuba: Celebrating Fidel’s Rebellious Life
Nelson Valdes
Fidel and the Good People
Norman Solomon
McCarthy’s Smiling Ghost: Democrats Point the Finger at Russia
Renee Parsons
The Snowflake Nation and Trump on Immigration
Margaret Kimberley
Black Fear of Trump
Michael J. Sainato
A Pruitt Running Through It: Trump Kills Nearly Useless EPA With Nomination of Oil Industry Hack
Ron Jacobs
Surviving Hate and Death—The AIDS Crisis in 1980s USA
David Swanson
Virginia’s Constitution Needs Improving
Louis Proyect
Narcos and the Story of Colombia’s Unhappiness
Paul Atwood
War Has Been, is, and Will be the American Way of Life…Unless?
John Wight
Syria and the Bodyguard of Lies
Richard Hardigan
Anti-Semitism Awareness Act: Senate Bill Criminalizes Criticism of Israel
Kathy Kelly
See How We Live
David Macaray
Trump Picks his Secretary of Labor. Ho-Hum.
Howard Lisnoff
Interview with a Political Organizer
Yves Engler
BDS and Anti-Semitism
Adam Parsons
Home Truths About the Climate Emergency
Brian Cloughley
The Decline and Fall of Britain
Eamonn Fingleton
U.S. China Policy: Is Obama Schizoid?
Graham Peebles
Worldwide Air Pollution is Making us Ill
Joseph Natoli
Fake News is Subjective?
Andre Vltchek
Tough-Talking Philippine President Duterte
Binoy Kampmark
Total Surveillance: Snooping in the United Kingdom
Guillermo R. Gil
Vivirse la película: Willful Opposition to the Fiscal Control Board in Puerto Rico
Patrick Bond
South Africa’s Junk Credit Rating was Avoided, But at the Cost of Junk Analysis
Clancy Sigal
Investigate the Protesters! A Trial Balloon Filled With Poison Gas
Pierre Labossiere – Margaret Prescod
Human Rights and Alternative Media Delegation Report on Haiti’s Elections
Charles R. Larson
Review:  Helon Habila’s The Chibok Girls: the Boko Haram Kidnappings and Islamist Militancy in Nigeria
David Yearsley
Brahms and the Tears of Britain’s Oppressed
FacebookTwitterGoogle+RedditEmail